Thailand’s new tax policy targets foreign earnings, including crypto profits, potentially affecting expats and investors residing in the country.
Taxing Overseas Earnings and Closing Loopholes
In a recent development that marks a significant shift in Thailand’s tax policy, the country is set to tax foreign earnings from crypto traders. This move is part of the Thai government’s efforts to close a long-standing loophole that allowed overseas income to enter the country tax-free. Thailand’s Revenue Department launched the initiative to finance a proposed economic stimulus package, the “digital wallet” scheme, estimated to cost taxpayers approximately 560 billion baht.
The new tax regulations are designed to target specific groups. Legal experts have identified three main categories affected by these measures: Thai residents engaging in foreign stock market trading through overseas brokerages, cryptocurrency traders, and individuals, both local and foreign, who reside in Thailand for more than 180 days annually.
Furthermore, the policy addresses a prevalent issue in which Thai residents exploited a legal loophole allowing them to repatriate foreign earnings into Thailand without being subject to taxation after holding these funds in offshore accounts for over a calendar year.
Impact on Foreign Investment and Income Inequality
While the government’s intent behind these tax changes is to boost revenue and curtail tax evasion, there are concerns about their potential side effects. Foreign investors, particularly private bankers, may perceive the Thai regulatory environment as uncertain due to these new measures, potentially deterring foreign investment.
Additionally, critics argue that the policy could worsen income inequality in Thailand, a concern echoed by the World Bank’s Rural Income Diagnostic, which identified Thailand as having the highest income inequality rate in the East Asia and Pacific region, with an income Gini index of 43.3% in 2019.
Balancing the imperative to generate additional revenue with the potential consequences for foreign investment and income inequality presents a significant challenge for Thai authorities. Striking the right balance will require careful consideration of both short-term economic goals and long-term socioeconomic stability.
Evolving Crypto Regulation in Thailand
Introducing these tax regulations aligns with Thailand’s broader evolution in crypto law. Earlier this year, Thailand’s Securities and Exchange Commission imposed stricter rules on digital asset service providers, including requirements to provide clear warnings about the risks associated with cryptocurrency trading and the prohibition of certain crypto lending services.
However, the trajectory of crypto regulation in Thailand may be subject to change with the recent election of Prime Minister Srettha Thavisin. Thavisin, a real estate tycoon, has displayed a crypto-friendly stance, participating in a substantial investment raise for a crypto-focused investment management firm, XSpring Capital. Furthermore, he oversaw the issuance of the firm’s token through XSpring in 2022.
Final Thoughts
As Thailand navigates the challenges these new tax regulations pose, the evolving landscape of crypto regulation adds complexity to the equation. Striking a delicate balance between stimulating economic growth and providing regulatory clarity for the crypto industry will be essential for Thailand’s future economic and financial stability.